China: Foreign Investors Buy Promising Chinese Equities

Data shows that the Chinese foreign investment market has improved since the beginning of June. Jun. 13, 2022.

Published 13 June 2022

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According to the Market tracker Wind, China had improved its net inflows of foreign capital for the last ten consecutive trading days by June 10.

Foreign investors have continued to snap up Chinese equities and bonds, with a promising forecast for the country's long-term development. The Chinese market had evidenced an advance in foreign capital investment by June 10, with the last ten consecutive trading days, according to market tracker Wind, being the most extended period of net inflows so far this year.

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Data collected by Wind indicated that during the last week, foreign investors had provided about 5.48 billion dollars in the northbound leg of the Chinese shares through the Stock Connect program, representing the most significant weekly increase this year. The number registered in this period sharply contrasts with the net outflow recorded in March when the outbreaks of the COVID-19 pandemic hit China's economy.

The equities director with Fidelity International, Monica Li, said that "foreign investment in the Chinese financial market experienced quite a few fluctuations this year." She said that the company currently holds around 6 billion dollars in A-shares. In her belief, the outflows result from a series of factors, such as the Russia-Ukraine conflict, U.S. Fed rate hikes, and the sporadic resurgences of COVID cases in the country.

The Chinese financial market started to grow after the country's authorities' double effort and re-adjusted anti-COVID mandates. By May 20, the Chinese A-share market was hit by an inflow of foreign capital. "Within only two weeks in June, we have seen foreign investors pile up their purchasing of Chinese A-shares, with the inflow surpassing the total in May," Li said. "That showed a sharp and swift shift of market sentiment."

Despite resurgence of COVID-19 cases in some parts of China, foreign investors bought a net USD 2.5 bln worth of Chinese stocks in May, biggest amount in four months. Overseas investors in A-share market reported a net inflow for 10th straight session on May 10 of RMB 11.6 bln. pic.twitter.com/pIBtM0kEQL
— China Economy (@CE_ChinaEconomy) June 13, 2022

Li considers that the Chinese financial market will continue to remain attractive for foreign capital in the long term; taking into account the country's sound economic fundamentals, the Chinese market offers interesting risk-reward against the backdrop of increasing global uncertainties.